Exam 6: Process Costing

Winters Company uses a weighted average process costing system and started 36,000 units this month.Winters had 15,000 units that were 25 percent complete as to conversion costs in beginning Work in Process Inventory and 6,000 units that were 35 percent complete as to conversion costs in ending Work in Process Inventory.What are equivalent units for conversion costs?

Continuous production losses are assumed to occur uniformly throughout the process.

Which of the following would be considered a discrete loss in a production process?

The formula for a chemical compound requires one pound of Chemical X and one pound of Chemical Y.One pound of Chemical X is processed in Department A and transferred to Department B for further processing where one pound of Chemical Y is added when the process is 50 percent complete.When the processing is complete in Department B,the finished compound is transferred to finished goods.The process is continuous,operating 24 hours a day. Normal spoilage occurs in Department A.Five percent of material is lost in the first few seconds of processing.No spoilage occurs in Department B.The following data are available for the month of October:

	Dept. A	Dept. B
Units in process, October 1	8,000	10,000
Stage of completion of beginning inventory	3/4	3/10
Units started or transferred in	50,000	?
Units transferred out	46,500	?
Units in process, October 31	?	?
Stage of completion of ending inventory	1/3	1/5
Units of Chemical Y added in Department B		44,500

Required: a. Prepare a schedule showing finished equivalents for Chemical $X$ and conversion for Depatment $A$ using the FIFO method. b. Determine for Department $\mathrm{B}$ the number of units of good product completed during October and the number of unit in process on Octobe 31 . c. Prepare a schedule for Depatment B showing finished equivalents for preceding department cost, cost of Chenical $Y$ , and conversion cost using the FIFO method. a. Units Transferred Out Ending Inventory 9,000 3,000 Begining Inventory-work done in prior period Normal spoilage 50,000 units X 5\%=2,500 units of b. Since the materal in the second department goes in at the 30 percent point and the enchng W1P inventony 15 units complete is the same as the equivalents of material 44,500 , given that units strated plus units in beginning WIP are equal to units complete plus endingWIP $10,000+46,500-44,500=12,000$ units in endingWIP.

c) Department B	Transferred In	Materials	Conversion Costs
Units of Chem Y added in current period	44,500	44,500	44,500
Ending Inventory 10/31	12,000 (from part b)	-0- WIP not 50% complete	2,400 (12,000 x 1/5)
Beginning Inventory 10/1	(10,000) (from fact pattern)	-0- WIP not 50% complete	(3,000) (10,000 * 3/10)
Total equivalent units	46,500	44,500	43,900

Required: a. Prepare a schedule showing finished equivalents for Chemic al $X$ and conversion for Dep atment $A$ using the FIFO method. b. Determine for Dep atment B the number of units of good product completed during October and the number of units in process on Octobe 31 . c. Prepare a schedule for Department $B$ showing finished equivalents for preceding department cost, cost of Chemical $Y$ , and conversion cos using the FIFO method.

List and explain the six steps of cost assignment when using process costing.How does cost assignment differ between the weighted average and FIFO methods?

The FIFO costing method assumes that units in beginning inventory are the first units transferred.

Weighted average equivalent units of production (EUP)can be determined by adding EUP's in ending work in process to units transferred out.

The numerator in the formula for equivalent units includes all beginning inventory costs when using the weighted average costing assumption.

Consider the following data for a cooking department for the month of February:

	Physical Units
Work in process, beginning inventory*	11,000
Started during current period	74,000
To account for	85,000
Good units completed and transferred out during current period:
	From beginning work in process	11,000
	Started and completed	50,000
	Good units completed	61,000
Spoiled units	8,000
Work in process, ending inventory~	16,000
Accounted for	85,000

*Direct material,100% complete;conversion costs,25% complete ~Direct material,100% complete;conversion costs,75% complete Inspection occurs when production is 100 percent completed.Normal spoilage is 11 percent of good units completed and transferred out during the current period. The following cost data are available:

Work in process, beginning inventory:
	Direct material	$220,000
	Conversion costs	30,000	$ 250,000
Costs added during current period:
	Direct material		1,480,000
	Conversion costs		942,000
Costs to account for		$2,672,000

Required:Prepare a detailed cost of production report.Use the FIFO method.Distinguish between normal and abnormal spoilage.

Grant Corporation The following information is available for Grant Corporation for the current month:

Normal spoilage (discrete)		1,100 units
Abnormal spoilage		900 units
Ending WIP	(70% complete)	13,000 units
Transferred out		72,500 units
Beginning Work in Process Costs:
	Material	$10,400
	Conversion	13,800
Current Costs:
	Material	$120,000
	Conversion	350,000

All materials are added at the start of production and the inspection point is at the end of the process. Refer to Grant Corporation.What is cost per equivalent unit for material using FIFO?

Colorful Creations Corporation The Colorful Creations Corporation makes wreaths in two departments: Forming and Decorating.Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion.During the month,6,500 wreaths were started.At month end,Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion.Assume Forming uses the weighted average method of process costing.Costs in the Forming Department are as follows:

Beginning Work in Process Costs:
	Material	$1,000
	Conversion	1,500
Current Costs:
	Material	$3,200
	Conversion	5,045

The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion.The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion.Decorating uses the FIFO method of process costing,and costs associated with Decorating are: Beginnning WIP Inventory : Transferredred In \ 1,170 Material 4,320 Conversion 6,210 Current Period: TransferredIn ? Material \ 67,74 Conversion 95,820 Refer to Colorful Creations Corporation.How many units were transferred to Decorating during the month?

Equivalent units are computed to assign costs to partially completed units.

Painter Corporation Painter Corporation has the following information for the current month:

Units started	100,000 units
Beginning Work in Process: (35% complete)	20,000 units
Normal spoilage (discrete)	3,500 units
Abnormal spoilage	5,000 units
Ending Work in Process: (70% complete)	14,500 units
Transferred out	97,000 units
Beginning Work in Process Costs:
	Material                 $15,000
	Conversion            10,000

All materials are added at the start of the production process.Painter Corporation inspects goods at 75 percent completion as to conversion. Refer to Painter Corporation.Assume that the costs per EUP for material and conversion are $1.00 and $1.50,respectively.What is the amount of the period cost for July using FIFO?

The ______________________________ report details all manufacturing quantities and costs,shows computation of EUP,and indicates cost assignments to goods manufactured.

Wright Company Wright Company adds material at the start of production.The following production information is available for September:

Beginning Work in Process Inventory
	(45% complete as to conversion)	10,000 units
Started this period		120,000 units
Ending Work in Process Inventory	80% complete as to conversion)	8,200 units
Beginning Work in Process Inventory Costs:
	Material	$24,500
	Conversion	68,905
Current Period Costs:
	Material	$ 75,600
	Conversion	130,053

Refer to Wright Company.What are the equivalent units for material using the FIFO method?

Which is the best cost accumulation procedure to use for continuous mass production of like units?

The cost of abnormal continuous losses is

Wright Company Wright Company adds material at the start of production.The following production information is available for September:

Beginning Work in Process Inventory
	(45% complete as to conversion)	10,000 units
Started this period		120,000 units
Ending Work in Process Inventory	80% complete as to conversion)	8,200 units
Beginning Work in Process Inventory Costs:
	Material	$24,500
	Conversion	68,905
Current Period Costs:
	Material	$ 75,600
	Conversion	130,053

Refer to Wright Company.What are the equivalent units for conversion using the FIFO method?

Which of the following is not a question that needs to be answered with regard to quality control?

Grant Corporation The following information is available for Grant Corporation for the current month:

Normal spoilage (discrete)		1,100 units
Abnormal spoilage		900 units
Ending WIP	(70% complete)	13,000 units
Transferred out		72,500 units
Beginning Work in Process Costs:
	Material	$10,400
	Conversion	13,800
Current Costs:
	Material	$120,000
	Conversion	350,000

All materials are added at the start of production and the inspection point is at the end of the process. Refer to Grant Corporation.What is the cost assigned to ending inventory using FIFO?